The epic fail of utility deregulation

The winners and losers in the nation’s wave of utility deregulation are clear.

The winners? Shareholders and executives. The losers? Customers and workers.

Over a decade of deregulation, the frequency and duration of outages have crept up, maintenance of aging infrastructure has been deferred, line workers have been laid off – and CEOs’ salaries have risen an average of 150 percent nationwide, a Hearst Newspapers investigation has found.

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During a five-month investigation, Hearst Newspapers found four primary and interrelated factors – cited again and again in interviews, studies and other research – that drive investor-owned utilities’ problems with reliability:

» Aging infrastructure

» A shrinking workforce that has curtailed both maintenance and response to storms

» Persistent failure to trim and remove trees near power lines

» A culture change that has placed profits above reliability

Investor-owned utility CEOs’ pay packages are increasingly based on profit and stock performance, with very little or none of their compensation dependent on reliability for ratepayers.

Between 2000 and 2011, the 150 percent increase in CEO pay packages at investor-owned utilities brought the average to more than $6 million a year, according to a survey conducted for Hearst by Longnecker & Associates, a Houston compensation consulting firm.

From 1999 to 2002, utilities cut their manpower costs by shedding 13,000 electrical power-line installers and repairers, one-fifth of the total, according to data obtained by Hearst from the Bureau of Labor Statistics. The number of utility linemen remains well below pre-2000 levels.

“We’ve gone from having dependability and reliability being the gold standard of the companies to profitability and money,” said Jim Hunter, director of the utility department at the Internation Brotherhood of Electrical Workers in Washington D.C.

“There needs to be a national inquiry into the reliability and efficiency of our electric supply,” said U.S. Sen. Richard Blumenthal, D-Conn.

The story has a national focus, but it most certainly includes Texas, where deregulation hasn’t lowered anyone’s utility bills. There doesn’t appear to be much political will to do anything about this, though, so I’m sure we’ll be reading the same story in another five or ten years. I don’t know what it will take to make this a real issue.